Global businesses are navigating unprecedented geopolitical shifts that redefine market access, competition, and investment security. Srividya Jandhyala examines how structural changes in trade and regulations are reshaping corporate strategies worldwide. Her insights help executives understand geopolitical risk and adapt operations for long-term resilience in an increasingly fragmented global economy.
Today’s business leaders are facing a complex geopolitical landscape. From trade wars and sanctions, to supply chain disruptions and political conflict, they must navigate a world they are not always prepared for.
How can companies, managers, and employees of global businesses make sense of our rapidly evolving world? How can they assess whether their risk is increasing or decreasing?
Traditionally, the assessment of geopolitical risk was centered around specific events. For example, a global company will expect geopolitical risk to be high if war breaks out between two countries it has operations in, and the risk to be low when the two countries establish a military alliance. But this approach does not account for structural changes that are likely to remain even as the intensity of an event itself dies down. Another issue with the traditional approach is that it fails to help companies determine how geopolitical events will affect their businesses. If strategic rivalry between the world’s biggest economies is an important geopolitical event, what are the implications for a company’s strategy and operations? Are there specific dimensions of a company’s operations and profitability that will be impacted?
The biggest risk for companies is that the institutional scaffolding that supports cross-border trade and investment is being reshaped. This means global companies have to find alternatives or learn to manage in a world where they have less confidence in their ability to transact across borders. Here are four ways geopolitics is reshaping global businesses.
Geopolitics shapes where you can compete. In years past, global companies found new markets as countries opened up. Liberalization and privatization were buzzwords that provided new market opportunities for internationalizing firms. Today, global companies can no longer take access to international markets for granted. Many governments are imposing increasingly stringent conditions and requirements for firms to access their domestic markets. This restricts the number and type of firms that can operate in a given country or sell their products/services there. When Indian firms learnt of the 50% tariff rate imposed on their products by the US, they quickly realized that this wasn’t just a tax; rather, their market access had been cut. In a sector like textiles, where margins are low, Indian firms would have to sell below cost just to continue operations in the US, or risk losing the market to other competitors.
Geopolitics influences how level the playing field is. In an ideal world, companies from around the world would compete on attributes like innovativeness, efficiency, and product quality. In other words, the rules of the game would level the playing field, no matter where in the world your company came from. Today, however, companies have to recognize that a level playing field is a myth. Domestic firms have an advantage over foreign rivals because of policy and regulatory advantages. Courts are more likely to rule in favor of domestic firms. Local companies also receive subsidies and other forms of support from their home governments. Germany’s largest semiconductor manufacturer, Infineon Technologies, received a nearly 1 billion euros subsidy for the construction of a new semiconductor manufacturing plant in Dresden.
At the same time, the playing field is also not level among foreign companies. India’s shrimp farmers are worried about losing market share to their Ecuadorian competitors because of differential tariffs; 50% for India and 15% for Ecuador. Brazilian products face 50% tariffs while their counterparts in other countries have a lower tariff rate. The fundamental principle of the World Trade Organization, the Most-Favored-Nation clause, is increasingly challenged or ignored.
Geopolitics shapes how secure a company’s foreign investments are. A central concern for any company investing abroad is that their physical assets and human capital will be safe. But investing in a foreign market is increasingly fraught because of geopolitical tensions. Carlsberg, the Danish brewer, assessed its Russian assets to be worth roughly $1 billion in 2023, but agreed to sell them for roughly $320 million as when it sought to exit the country in late 2024. Wells Fargo, an American bank, reportedly suspended all travel to China after a senior executive faced an exit ban and was blocked from leaving the country. Companies are left wondering how to ensure that investments are protected, guarantee the safety of employees or expatriate managers, or repatriate profits.
Geopolitics determines the technical and operational standards. Werner von Siemens, the founder of the eponymous German conglomerate, is said to have noted that “He who owns the standards, owns the market”. Some companies appear to have learnt this lesson well; American technology companies like IBM and Qualcomm earned hundreds of millions from licensing their intellectual property. But today’s geopolitical contestation is also about controlling standards in new technologies. New 6G standards adopted by the International Telecommunication Union were championed by the Chinese Academy of Sciences and China Telecom. BYD’s new megawatt chargers, which can add up to 400 kilometers of range in just five minutes, could set new standards in electric vehicles. Companies that license such technologies may wonder if geopolitical competition would lead governments to turn on and off access.
Global businesses need to adapt
Major geopolitical events like military conflicts and trade wars are forcing companies to evaluate how their businesses will be impacted. While such events no doubt have an immediate impact, managers must also understand how the structural factors enabling cross-border trade and investment are changing. The challenge for global businesses is to figure out an alternate system to support their international operations.
About the Author
Srividya Jandhyala is an Associate Professor of Management at ESSEC Business School. She is the author of the bestselling book The Great Disruption: How Geopolitics is Changing Companies, Managers, and Work.
